A Texas borrower with a home equity loan on her homestead wants to make a large lump-sum payment to pay off the loan early. The lender informs her there will be a 3% prepayment fee. Under Texas law, how should the borrower respond?
Correct Answer
B) She should refuse to pay because Texas law prohibits prepayment penalties on home equity loans secured by a homestead
Under Texas Constitution Article XVI, Section 50(a)(6)(G), a home equity loan on a Texas homestead cannot include a penalty for prepayment or acceleration. The borrower has the right to pay off the loan at any time without any fee or penalty.
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An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
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- → A Texas property owner defaults on both a first mortgage and a second-lien home equity loan. The first mortgage lender forecloses and sells the property at the trustee's sale. Under Texas law, what happens to the second-lien home equity loan?
- → Under Texas foreclosure law, a property is sold at a trustee's sale on the first Tuesday of the month. The winning bidder pays the full purchase price. Under Texas Property Code, when does the bidder receive a trustee's deed?
- → In Texas, the standard security instrument for real estate loans is a deed of trust rather than a mortgage. Which parties are involved in a Texas deed of trust?
- → Under Texas Constitution Article XVI, Section 50(a)(6), a home equity loan on a Texas homestead must comply with numerous constitutional requirements. All of the following are required provisions of a Texas home equity loan EXCEPT:
- → Under Texas Constitution Article XVI, Section 50, all of the following liens may be enforced against a Texas homestead EXCEPT:
- → A Texas homeowner closes on a home equity loan on January 15. The loan proceeds are not actually disbursed until January 18, three days after closing. The borrower exercises the right of rescission on January 26. Under Texas Constitution Article XVI, Section 50(a)(6), is this rescission timely?
- → A Texas lender fails to cure a constitutional defect in a home equity loan within the required timeframe. The borrower files a lawsuit. Under Texas Constitution Article XVI, Section 50(a)(6)(Q)(x), what is the potential penalty for the lender's failure to cure?
- → A Texas lender makes a home equity loan that violates one of the requirements of Texas Constitution Article XVI, Section 50(a)(6). After the loan is made, the lender discovers the violation. Under Texas law, the lender has how many days to cure the defect after being notified by the borrower?
- → A Texas homeowner obtained a home equity loan that violated the constitutional requirements under Article XVI, Section 50(a)(6). The lender claims it did not know about the violation. The borrower sends a written notice of the defect to the lender. Under Texas law, which of the following correctly describes the cure and forfeiture process?
- → A Texas homeowner wants to add an addition to the home. The contractor's total bid is $85,000. Which of the following must be completed BEFORE work begins for the contractor to have a valid mechanic's lien on the homestead?
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Previous Question
Under Texas Constitution Article XVI, Section 50, a Texas homestead is protected from forced sale to satisfy most debts. All of the following are liens that may be enforced against a Texas homestead EXCEPT:
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Eduardo and Veronica, a married couple in San Antonio, want to obtain a home equity line of credit (HELOC) on their homestead valued at $600,000. Their first mortgage balance is $350,000. Under Texas Constitution Article XVI, Section 50, what is the maximum credit limit for the HELOC?